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Bargaining Power of Customers
In this area, there is only a moderate force being presented due to three reasons. These reasons include low switching costs, moderate substitute availability, and low volume of purchases. Low switching costs presents a strong force because there is a barrier that prevents customers from being able to easily switch to a different company vehicle due to the limited amount of companies in the market. Substitute availability presents a moderate force which also limits the bargaining power of customers. This also leads into the low volume of purchases. Due to people wanting their own vehicles, there aren’t a lot of purchases being made which presents a weak force. Tesla also has to deal with public transportation which also reduces the amount of purchases that are being made.
Bargaining Power of Suppliers
In this area, there is only a moderate force being presented due to a few reasons. In the automotive industry, supply chains want to have higher priced raw materials which drives the prices up for automotive businesses. In order to balance the bargaining power, Tesla has worked with multiple suppliers to gain trust and likeness with them. Another thing Tesla has done is making a supplier solely rely on them. This allows for the supplier to trust Tesla, provide great prices, and gives more power towards Tesla in this area when it comes to their raw materials.
In this market, Tesla is in a very competitive market. This in turn takes away from the overall profitability of the company, but finding ways to get passed this is the key. To deal with the competitive rivalry, they need to continually work on differentiating themselves from the competition. By creating new cars, different styles, and more. Another thing that Tesla can do is by working with their competitors to tackle the large scale market, rather than focusing on the small scale market. This would help to drive up the market size, increase profits, and solidify longevity for the company as well.
Department, S. M. (n.d.). Tesla, Inc.. porter five forces analysis, Porter 5 forces analysis. Fern Fort University. Retrieved November 23, 2021, from http://fernfortuniversity.com/term-papers/porter5/analysis/862-tesla–inc-.php.
Kissinger, D. (2019, February 22). Tesla Inc.. Five forces analysis (Porter’s Model) & Recommendations. Panmore Institute. Retrieved November 23, 2021, from http://panmore.com/tesla-motors-inc-five-forces-analysis-recommendations-porters-model.
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